SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended May 31, 2000 Commission File Number 0-17249
AURA SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-4106894
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2335 Alaska Ave.
El Segundo, California 90245
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 643-5300
Former name, former address and former fiscal year, if changed since
last report: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at June 14, 2000
Common Stock, par value 250,228,540 Shares
$.005 per share
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AURA SYSTEMS, INC. AND SUBSIDIARIES
INDEX
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PART I. FINANCIAL INFORMATION
<S> <C> <C> <C>
ITEM 1. Financial Statements
Statement Regarding Financial Information 1
Condensed Consolidated Balance Sheets as of
May 31, 2000 and February 29, 2000 2
Condensed Consolidated Statement of Operations for the three
Months Ended May 31, 2000 and 1999 3
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended May 31, 2000 and 1999 4
Notes to Condensed Consolidated Financial Statements 5
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 8
ITEM 4. Submission of Matters to Vote by Security Holders 8
ITEM 6. Exhibits and reports on Form 8-K 8
SIGNATURES 9
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AURA SYSTEMS, INC. AND SUBSIDIARIES
QUARTER ENDED MAY 31, 2000
PART I. FINANCIAL INFORMATION
The financial statements included herein have been prepared by Aura Systems,
Inc. (the "Company"), without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC"). As contemplated by the SEC
under Rule 10-01 of Regulation S-X, the accompanying financial statements and
footnotes have been condensed and therefore do not contain all disclosures
required by generally accepted accounting principles. However, the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K for
the year ended February 29, 2000 as filed with the SEC (file number 0-17249).
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AURA SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
May 31, February 29,
Assets 2000 2000 *
------------- ---------------
<S> <C> <C>
Current assets
Cash and equivalents $ 406,175 $ 260,437
Receivables-net 1,722,797 2,459,200
Inventories 10,004,240 11,189,227
Notes receivable 3,653,476 3,557,007
Other current assets 900,096 360,177
--------------- ---------------
Total current assets 16,686,784 17,826,048
--------------- ----------------
Property and equipment, at cost 41,075,400 42,219,417
Less accumulated depreciation
and amortization (16,219,505) (15,184,362)
---------------- ---------------
Net property and equipment 24,855,895 27,035,055
Long-Term investments 2,123,835 2,123,835
Long-Term receivables 3,684,189 1,250,000
Patents and trademarks, net 4,553,995 4,615,769
Other assets 3,261,586 3,271,831
--------------- ----------------
Total $ 55,166,284 $ 56,122,538
================ ================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 8,742,983 $ 9,899,531
Accounts payable 3,935,704 4,216,004
Accrued expenses 4,703,300 1,634,300
Convertible note, unsecured 250,000 1,250,000
---------------- ----------------
Total current liabilities 17,631,987 16,999,835
---------------- ----------------
Notes payable and other liabilities 37,219,555 37,606,695
COMMITMENTS AND CONTINGENCIES
Stockholders' equity
Common stock par value $.005 per share and additional paid in
capital. Issued and outstanding 239,067,065
and 196,975,392 shares respectively. 244,737,866 234,196,092
Common stock not issued - 9,132,774
Cumulative currency translation adjustment (CTA) (365,932) (365,932)
Accumulated deficit (244,057,192) (241,446,926)
----------------- -----------------
Total stockholders' equity 314,742 1,516,008
---------------- ----------------
Total $ 55,166,284 $ 56,122,538
================ ================
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See accompanying notes to condensed consolidated
financial statements.
* Amounts at February 29, 2000 have been derived from audited financial
statements.
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AURA SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MAY 31, 2000 AND 1999
(Unaudited)
2000 1999
---------------- ---------------
<S> <C> <C>
Net Revenues $ 381,521 $ 1,540,729
Cost of goods and overhead 2,514,357 3,225,375
--------- ------------
Gross Profit (2,132,836) (1,684,646)
----------- ------------
Expenses
Selling, general and administrative 2,203,516 2,506,257
Research and development 32,048 108,557
-------------- -------------
Total expenses 2,235,564 2,614,814
-------------- ------------
(Loss) from operations (4,368,400) (4,299,460)
-------------- -------------
Other (income) and expense
(Gain) on sale of assets (1,756,746)
Other (income) expense (563,401) 88,214
Interest expense -net 562,013 797,184
----------- -------------
Loss from continuing operations (2,610,266) (5,184,858)
--------------- ----------------
Loss from discontinued operations - (302,022)
-------------- ----------------
Net (loss) $ (2,610,266) $ (5,486,880)
============== =============
Net (loss) per common share-basic $ (.01) $ (.05)
============= =============
Weighted average shares used
to compute net (loss) per share 237,107,199 107,786,500
=========== ============
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See accompanying notes to condensed consolidated
financial statements.
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AURA SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 2000 AND 1999
(Unaudited)
2000 1999
------------ -------------
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Net cash (used) in operations $ (29,064) $ (5,277,473)
--------------- -----------
Cash flows from investing activities:
Proceeds from sale of subsidiary and assets 64,311 1,000,000
Notes receivable 905,092 516,667
Purchase of property and equipment - (70,704)
--------------- -----------
Net cash provided by investing
activities 969,403 1,445,963
--------------- ---------------
Cash flows from financing activities:
Net proceeds (repayments) from borrowings (100,000) -
Proceeds from exercise of warrants - 9,300
Repayment of debt (978,601) -
Net proceeds from sale of stock 284,000 -
--------------- ---------------
Net cash provided (used) by financing
activities: (794,601) 9,300
---------------- ---------------
Net increase (decrease) in cash and equivalents 145,738 (3,822,210)
Cash and equivalents at beginning of period 260,437 3,822,210
--------------- ----------------
Cash and cash equivalents at end of period $ 406,175 $ 0
=============== =================
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 303,817 $ 71,568
Income Tax 0 0
---------------- --------------
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Supplemental disclosure of non-cash investing and financing activities:
Effective March 1, 1999, the Company sold its MYS subsidiary for $4.2 million in
the form of a note receivable of $3.2 million and a cash down payment of $1
million, included above. In the quarter ended May 31, 1999, the Company
satisfied a liability of $20,000 through the exercise of 40,000 warrants.
In the quarter ended May 31, 2000, $1,000,000 of convertible debt was converted
into 3,000,000 shares of the Company's Common Stock. The Company also issued
462,963 shares of its common stock to satisfy a liability in the amount of
$125,000. Effective March 1, 2000, the Company sold the assets of its Ceramics
subsidiary for $3.5 million in the form of a note receivable of $2.5 million, a
cash down payment of $64,311 included above, and the payment of $800,000 to
third parties in satisfaction of liabilities and an additional $100,000 payment
on June 1, 2000.
See accompanying notes to condensed consolidated
financial statements.
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AURA SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
1) Management Opinion
The condensed consolidated financial statements include the accounts of
Aura Systems, Inc. ("the Company" or "Aura") and subsidiaries from the dates of
acquisition. All material inter-company balances and inter-company transactions
have been eliminated.
In the opinion of management, the accompanying condensed consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) and reclassifications for comparability necessary to
present fairly the financial position at May 31, 2000 and results of operations
and cash flow for the three months ended May 31, 2000 and 1999.
2) Capital
In the quarter ended May 31, 2000, 150,000 shares of stock were sold
for total gross proceeds of $300,000. In the quarter ended May 31, 1999,
warrants to purchase 70,000 shares of common stock of the Company were
exercised.
3) Contingencies
The Company is engaged in various legal actions. See the Company's Form
10-K, Item 3 Legal Proceedings for the year ended February 29, 2000 as filed
with the SEC (file number 0-17249) for a discussion of the legal activities. In
the case of a judgment or settlement, appropriate provisions have been made in
the financial statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Report may contain forward-looking statements, which involve risks
and uncertainties. The Company's actual results may differ materially from the
results discussed in such statements. Certain factors could also cause actual
results to differ materially from those discussed in such forward-looking
statements, including factors discussed in the Company's Form 10-K for the
period ended February 29, 2000, and factors discussed in this Report.
Results of Operations
For the three months ended May 31, 2000, the Company $2,610,266 on net
revenue of $381,521 compared to a loss from continuing operations of $5,184,858
on net revenue of $1,540,729 in the prior year period. The decrease in revenue
is primarily attributable to the sale of the assets of the Company's wholly
owned subsidiary, Aura Ceramics. Approximately 56% of the sales in the
comparable prior fiscal year quarter were attributable to this subsidiary.
Cost of goods and overhead decreased from $3.2 million in the quarter ended
May 31, 1999 to $2.5 million in the quarter ended May 31, 2000, due primarily to
the disposition of the assets of the Company's Aura Ceramics subsidiary.
Approximately 13% of the cost of goods and overhead in the comparable prior
fiscal year quarter was attributable to this subsidiary.
Selling, general and administrative expenses decreased from $2.5 million in
the quarter ended May 31, 1999 to $2.2 million in the quarter ended May 31,
2000.
Research and development expense decreased from $108,557 in the quarter
ended May 31, 1999 to $32,048 in the quarter ended May 31, 2000, as the Company
focused its reduced resources on the sales and marketing of the Company's
product, the AuraGen(TM).
Depreciation and amortization for the quarter ended May 31, 2000
totaled approximately $1.6 million.
Net interest expense for the quarter ended May 31, 2000, decreased to
$562,013 from $797,184 in the prior year quarter due primarily to the conversion
of approximately $10 million of debt into equity and the forgiveness of
approximately $19 million of debt, partially offset by approximately $11 million
in accounts payable being converted into long term debt and accruing interest at
8%.
Liquidity and Capital Resources
At May 31, 2000, the Company had cash of $406,175 as compared to a cash
level of $260,437 at February 29, 2000. Inventories decreased by $1,184,987 due
primarily to the disposition of assets of the Company's Ceramics subsidiary.
Cash flows used in operations decreased by $5,148,409 as compared to
the fiscal quarter ended May 31, 1999. The Company's working capital was a
negative $945,203 at May 31, 2000 as compared to $826,213 at the fiscal year
ended February 29, 2000 while the current ratio declined to .95:1 at May 31,
2000 from 1.05:1 at February 29, 2000.
In the fiscal quarter ended May 31, 2000, the Company received net
proceeds of $284,000 from the sale of 150,000 shares of the Company's common
stock. The Company also satisfied a liability of $125,000 through the issuance
of 462,963 shares of common stock. In the fiscal quarter ended May 31, 1999, the
Company received proceeds of $9,300 from the exercise of warrants. The Company
also satisfied a liability of $20,000 through the exercise of 40,000 warrants.
In the past, the Company's cash flow generated from operations has not been
sufficient to completely fund its working capital needs. Accordingly, the
Company has also relied upon external sources of financing to maintain its
liquidity. In order to finance its existing operations it will be necessary for
the company to obtain additional working capital from exteral sources. The
Company is presently seeking additional sources of financing, including bank and
equity financing. No assurances can be provided that these funding sources will
be available at the tmes and in the amounts required. the inability of the
Company to obtain sufficient working capital at the times and in the amounts
required would have a material adverse effect on the Company's business and
operations.
For additional information regarding the Company's financial condition,
see the Company's Form 10K, Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended February 29,
2000 as filed with the SEC (file number 0-17249).
Forward Looking Statements
The Company wishes to caution readers that important factors, in some
cases, have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual consolidated results for the second
quarter of Fiscal 2001, and beyond, to differ materially from those expressed in
any forward-looking statements made by, or on behalf of the Company.
Such factors include, but are not limited to, the following risks and
contingencies: Changed business conditions in the automotive industry and the
overall economy; increased marketing and manufacturing competition and
accompanying prices pressures; contingencies in initiating production at new
factories along with their potential underutilization, resulting in production
inefficiencies and higher costs and start-up expenses and; inefficiencies,
delays and increased depreciation costs in connection with the start of
production in new plants and expansions.
Relating to the above are potential difficulties or delays in the
development, production, testing and marketing of products, including, but not
limited to, a failure to ship new products and technologies when anticipated.
There might exist a difficulty in obtaining raw materials, supplies, power and
natural resources and any other items needed for the production of Company and
another products, creating capacity constraints limiting the amounts of orders
for certain products and thereby causing effects on the Company's ability to
ship its products. Manufacturing economies may fail to develop when planned,
products may be defective and/or customers may fail to accept them in the
consumer marketplace.
In addition to the above, risks and contingencies may exist as to the
amount and rate of growth in the Company's selling, general and administrative
expenses, and the impact of unusual items resulting from the Company's ongoing
evaluation of its business strategies, asset valuations and organizational
structures. Furthermore, any financing or other financial incentives by the
Company under or related to major infrastructure contracts could result in
increased bad debt or other expenses or fluctuation of profit margins from
period to period. The focus by some of the Company's businesses on any large
system order could entail fluctuating results from quarter to quarter.
The effects of, and changes in, trade, monetary and fiscal policies,
laws and regulations, other activities of governments, agencies and similar
organizations, and social and economic conditions, such as trade restrictions
impose yet other constraints on any company statements. The cost and other
effects of legal and administrative cases and proceedings present impose another
factor which may or may not have an impact.
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PART II - OTHER INFORMATION
Item 1: Legal Proceedings
For information regarding pending legal proceedings, see Note 3 to
the Company's Condensed Financial Consolidated Financial Statements appearing
elsewhere herein.
Item 4: Submission of Matters to Vote by Security Holders
The Company's 1999 Annual Meeting of Shareholders was held on
March 6, 2000. At the Annual Meeting each of the Company's nominees were elected
to serve as directors of the Company. The election results are as follows:
NAME For Withheld Abstain
Zvi "Harry" Kurtzman 91,684,018 9,827,982 2,763,422
Harvey Cohen 92,864,439 8,647,561 2,763,422
Salvador Diaz-Verson, Jr. 93,007,303 8,504,697 2,763,422
Sanford R. Edlein 92,067,732 9,444,268 2,763,422
Norman Reitman 91,906,240 9,605,760 2,763,422
Stephen A. Talesnick 93,416,650 8,095,350 2,763,422
David F. Hadley 92,099,913 9,412,087 2,763,422
The shareholders in addition, approved the following proposals:
1. To increase the number of authorized shares from 200,000,000 to 500,000,000.
For Withheld Abstain
102,455,535 3,586,711 284,666
2. To approve an amendment to the Company's Certificate of Incorporation to
authorize 10,000,000 shares of Preferred Stock.
For Withheld Abstain
98,424,057 7,655,739 180,539
3. To adopt the Company's 2000 Stock Option Plan.
For Withheld Abstain
98,276,911 4,566,007 3,706,937
4. To adopt a proposal to effect a reverse split of the Company's common stock.
For Withheld Abstain
89,935,298 18,184,528 251,457
Item 6: Exhibits and Reports on Form 8-K
a) Exhibits:
See exhibit index
b) Reports on Form 8-K:
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AURA SYSTEMS, INC.
(Registrant)
Date: July 17,2000 By: /s/Steven C. Veen
------------ -------------------------------------
Steven C. Veen
Senior Vice President
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
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INDEX TO EXHIBITS
Exhibit
Number
EX-27 Article 5, Financial Data Schedule
